Pyramiding vs. Network Marketing


Pyramiding vs. Network Marketing

You probably heard of countless negative claims about network marketing. Most of it pertains to a system called “ponzi scheme” or more commonly known as a pyramiding scam. This is perhaps due to the several network marketing companies who eventually folded up after several years or those negative claims from distributors who did not recoup their investments.

Let’s talk about the issue of pyramiding. In every organization, there is always a ‘pyramid’ as evidenced in the organization chart where the people at the top make more money than those beneath them. Having said that, every conventional company is a pyramid. Why?  In a conventional company, there exists a structure whereby the CEO generates income from the efforts of each person below, but those workers do not have the opportunity to earn as much as, or more than, the CEO.

Have you ever heard of a general worker who makes more than the CEO or the General Manager, given that their source of income is solely dependent on their work? Does middle management ever make more than the company’s senior management does? The old model just isn’t fair for those underneath. No matter what their effort, they can never make more than those above them can. The pyramid then is not equitable.

However, in network marketing, you are building an income from the production of everyone in your organization whether you directly sponsored them or not. Each person in your organization can do the same, so now you have created a situation where everyone has the same amount to gain. It’s the fairest structure available because everyone can create exactly the same situation. And in fact, due to the nature of network marketing, people under you can and do in some cases, earn more than you simply because they can access levels that you cannot.

Everyone can reach down into their organization the exact same number of levels. If someone has created more volume in their levels than you have in yours, and some of those levels are beyond your ability to reach them, that person can actually make more than you can, even though they are under you!

In fact, Robert Kiyosaki himself, the famous author of Rich Dad Poor Dad recommends network marketing. He says that network marketing levels the playing field. It is not about your college degree, it is not the family you came from, your race, your attractiveness, or whatever the stuff that people do to discriminate. It is really about performance. If you perform, you get paid. And if you do not perform, you do not get paid. And if you do not like that, than the business is not for you. However, once you put your efforts into it and your’re determined to succeed, then you can possibly achieve your ‘impossible dreams’.

Another thing that he pointed out is that in network marketing, they want you to get better. In the corporate world, they do not want you to get better. You get better, you threaten their job because you can replace them. So it is a completely different environment in network marketing.

So if this is the set up, why doesn’t everyone go out and start their own network marketing business? Kiyosaki tells something about fear.I have a coward inside of me, I know that person very well. This is the battle we all face. And I think often times, cowards ask other cowards, and they get talk out of it, or they go, ‘Why would you do that’, and they get bullied into being a coward.”

In my quest to financial freedom, I’ve seen this industry before. I attended seminars from different network marketing companies. But sad to say, I did not work on it. I did not focus on the business and so nothing happened. They usually say that it’s a quick-rich scheme but honestly it’s not. It’s not easy to sell, much more to recruit people who will be under your organization, and train them as leaders to duplicate your success.

Lately, I opened my mind again into the potential of network marketing. This time I will pour effort into it. I decided to join one based on the 25 questions to ask your sponsor in MLM that I made two years ago which are now the most commented article in this blog.

Network marketing, is in fact, the best training ground to become an established entrepreneur. How would you become strong if in the first place you cannot handle your fears? More so, it is the cheapest way of building a business. When you build a business from scratch, it requires huge capital plus a tremendous amount of effort because you will be solely in charge of that business from its day-to-day operations. When you build a business through franchising, it requires huge amount of capital as you’ll be buying an established business system. Whereas in network marketing, you only need a small amount to start the business.

This video explains how network marketing works – to PAY IT FORWARD

Get Out of Your Comfort Zones! For those entrepreneurs, I am inviting you to see this opportunity. It is not a quick rich scheme contrary as to what others say. For employees who have intense desire to get out of the rat race, I will be your personal coach. As your leader, I will not only be guiding you through the business but also be your coach on financial management to be sure not to put your earnings on expensive doodads and other liabilities.


Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

24 responses on “Pyramiding vs. Network Marketing

  1. networking – is a system of moving products from the factory to the consumers, through an organization of users, retailers and network builders..

  2. MLM is a confidence game where the people selling marketing materials and seminars are making money, while everyone else is hustling for peanuts in an intuitively reasonable, but ultimately impossible business model. The huge focus on personal motivation is so you blame yourself when things go wrong and stick it out longer.

    • James, I am interested to join an MLM company because I can say that it is a form of business that has a lesser capital than a franchise (which has hidden charges) but I have lots of friends who invested in an MLM company but as I observed there were not successful and the promise of better living was not achieve.

    • Forgive me for answering a question that was not addressed to me. Yes, MLM companies let you enter a business with a very low capital as compared to starting a business from scratch and buying a franchise.

      I believe that the success rate of networkers is dependent on two things. First is group effort and support for one another under the network and the networker’s determination and will to succeed in this type of business. Between the two, it ultimately boils down on how strong is your determination to succeed. Without these two, failure rate and attrition is very high.

      It’s hard. I must contradict what other people say that it’s a quick rich scheme because it’s totally not! However, what’s good in this business is that if you planted your efforts in building your group and honed them to become a leader and duplicate your success with them, then it can be a huge source of passive income and you can surely take advantage of the law of leverage which is mostly available to big business owners like Henry Sy, Lucio Tan, and the like.

    • The question really here is: What have they done to build out their business. Joining is one thing, Doing the business is another thing, but Training is everything. If you join and invest time on why and how you are doing the business, and really do your part to learn, to practice and to teach. That would build a huge business in this industry. But then, A lot of people who have this huge sense of pride, or have this “Lottery Mindset” thinking that if they would join, That would make them rich. Or some, really take this business “small time” or a hobby because they have just invested a small amount. This is a Business its not a stock investment and most importantly its not a Guarantee. If you do your part as a business partner, you will be well rewarded. The key here is Leverage, if you can suggest an affordable system where you can have this advantage, If you either think that this business is for you or not, Perhaps you are right.

  3. Direct Selling/Network Marketing Industry has produced more millionaires than any other industry. It is actually the most patient business wherein the Company is patient with its distributors until it learns the business skills needed for it to grow. What’s also good with this industry is it does not only teaches business skills, but it also teaches life skills which is essential in the growth of an individual and is also developed by every successful person. As James Roberti, a well known Network Marketer in the United States, said “Its a personal development disguised in a business”.

    But despite of the great business model, Why does a lot of people fail in this industry? From my point of view is that, First, is lack of knowledge and skills needed in the modern market and economy. Second, a lot of people treat this business as a hobby and does not take it seriously. Third, A lot of personal pride because a change or shift in their mindset takes them out of their comfort zone which makes them feel uncomfortable.

    Now you may be asking how to be successful in this business? Let me share this quote from Tim Erway, a well known copywriter/Network Marketer: ” Find someone who`s got what they want, do what they do, and get what you want”.

    Great post by the way, Tyrone. Its a great enlightenment for people who mistaken Network Marketing as an illegal pyramid scam.

    With your knowledge and skills, you can really help a lot of people improve lives. God bless in your business. =)

    • Ken, you mentioned that lives of people involved in MLM companies are being improve, if you will evaluate your life has it been improve by investing in MLM companies?

    • @george guzman- “worry about the chances you missed , when you don’t even try…”

      ang networking ay business , katulad ng traditional business may mga business na nagiging successful at maroon din hindi.. may mga businessman na nagiging successful businessman at meron din hindi
      hindi lahat ng nag tayo ng business ay yumaman, marami din nalulugi sa traditional business…

      kung sa employment naman, ganun din hindi lahat ng nag aral at naka graduate ay maroon trabaho,, maraming graduate ngaun specialy mga nursing students na walang work…

      ganun din sa networking hindi lahat nagiging successful.
      may mga yumayaman sa networking at mayroon din hindi, lahat tayo ay gusto yumaman pero hindi lahat tayo ay may malalim na dahilan, commitment, focus, determination, lakas ng loob etc.., para yumaman.. – minsan kasi pag nahirapan na tayo nawawala na ang focus natin, at bumabalik na tayo sa comfort zone…at minsan nag qu-quit.

      tips para maging successful sa mlm ” do what ever it takes to achieved your dreams…
      “winners never quit, quiters never win”

  4. Hi! you mentioned that you invested to other MLM companies in the past. I just want to ask, what makes you think that the one that your are investing now is a good choice.

    • Hi George! Yes, I invested in other MLM companies in the past but none of them prospered.

      I believe that your team leader support is very crucial in this kind of business and this is what I found in this company. I am under a team which is very supportive. Group effort is very essential here because without it, failure is rampant and you could easily give up and quit.

      In addition, I’ve seen their marketing plan to be excellent notwithstanding the products which are manufactured in the US. The company has been in the industry for 5 years and growing strong.

      Take a look at this opportunity by attending our business symposium. No commitment on your part. Just see and evaluate. In case you join, we will be in full support here with you.

  5. Hi Tyrone, ,may I know which MLM company you’re working for? I’m seriously thinking about joining a network marketing group, but I don’t know how to identify the good ones from bad ones.

    Thanks!

  6. The key to a successful business is selling a product that there’s actually demand for. Determination and having a stellar team doesn’t mean squat if there’s no market. The “freedom” of MLM is having all the responsibilities of an in-house sales force, minus the hassle of being provided a wage or health insurance!

    • There is actually a demand for the products of the company I joined. Looking at fellow members advertising and selling the products of the company at Sulit.com.ph, they have generated sales not only here in Philippines but also in other countries such as Australia, Switzerland, Japan, Dubai, Canada, among others. To gain trust from customers, they are actually posting proofs of deliveries from the courier companies they used in shipping the products.

      I can say that the products are in demand because they are made by a trusted brand in the US, notwithstanding the countless testimonials of success from consumers themselves. The success of MLM companies rely on product movements. If it solely relies on recruiting people, then chances are it is a ponzi scheme and it’s bound to collapse. The company won’t be operating for 5 years as of now without a great line of products.

  7. “Network marketing gives people the opportunity, with very low risk and very low financial commitment, to build their own income-generating asset and acquire great wealth.” – Robert T. Kiyosaki,

  8. This is a great article. Yes, a network marketing business does have the potential to make anyone rich. Fact is, around the world, no other industry has produced more millionaires than network marketing. But, like any other legitimate industry, making money in this industry takes work (time and effort). If someone tells u that u’ll get rich instantly if u just join their organization, chances are, u’re being scammed. Do ur research and be very discerning about which MLM company u are going to invest in. Look for integrity in the company and product, because it’s ur integrity that’s at stake once u start representing that company and product.

  9. I saw your ad in sulit and I saw the MLM company that you are associated with. I’m quite intrigue how an MLM company got to the Top 10 Entrepreneurs of 2010 by Entrepreneur Magazine? I still remember that Mang Inasal, Generics Pharmacy and Sarabia Optical held that recognition too last 2009. That caught my attention, can you explain how did they manage on that award? Did other MLM companies win that award or be featured in Entrepreneur Magazine Philippines?

    Hope you can clarify this. I notice that there are almost pro-networking comments here. I hope you can justify. To be honest, I’m not a fan of networking but seeing Nature’s Way in USA and the recognition of the prestigious Entrepreneur Magazine caught my attention. Last month I went to Portland, Oregon and I saw Nature’s Way products in Target, one of the top store in the USA.

    • I think the proper management of the company coupled with the various awards they’ve won placed the company’s President and CEO to be featured as one of the 10 outstanding entrepreneurs here in the Philippines. In fact, he was the youngest among them. Currently, I think that the company I joined is perhaps the most successful Filipino-based MLM company having generated billions of sales. As for other MLM companies, I’m not sure if there’s any.

      Nature’s Way has a variety of products. I think the company I joined with is the only authorized distributor of those specific products from them. Nature’s Way maybe selling their own products in retail stores in the US but for sure that’s different from the product that we are authorized to distribute.

  10. Yes, there is another network marketing company that generates billions in sales. The company has been in operation for 20 years and is based in the US giving distributors commissions in dollars.

    Anyway

    Kudos to Tyrone for educating people about network marketing. After reading the comments here, i have a clear idea which company you are with. I myself am involve in network marketing for some time now and I do agree that it is not a walk in the park, you really have to want to succeed.

    Network marketing here has been deemed “evil” or “scam” by people who don’t really understand it. Often times negative comments about the industry comes from people who haven’t got the success they really aimed for. Some of them just got screwed because some companies shut down when the market became saturated – which would not really be a problem if it were legal in the first place.

    Bottom line, network marketing works!

  11. Nice blog you have here Tyrone. It gave me additional know-how on networking companies. So far I have only heard a few “like” comments regarding networking businesses compared to the “unlike” ones, if you know what I mean. BTW, I have just recently joined one and despite of all the negative comments I have heard from people, as it conventionally is, I pursued into giving it a chance. True, it will never really be a walk in the park. It takes time, effort and commitment.

  12. The classical pyramid or ponzi scam consists in getting people to hand over their money to you with the promise of big interest in short time, for example:

    Hand me 50,000.00 pesos and in 1 month time and every month after that I will give you 10,000.00 pesos for as long as you let me keep your initial 50,000.00 pesos.

    That is what for my two cents worth is called the pyramid or ponzi scam.

    It works like this, you get one person to hand over to you 50,000.00 pesos, and in 1 month time you give him 10,000.00, and you keep 40,000.00 pesos.

    This person got so happy he convinces others to do likewise, namely, his family members and his friends.

    Now you have several people after several months who have handed over to you 50,000.00 pesos each.

    Every month you give back to each of these persons 10,000.00 pesos, but you continue to get new clients to put more 50,000.00 pesos each in your hands.

    Then one day you run away while you still have a lot of money with yourself from all those people who delivered each 50,000.00 pesos and each one still expecting to get 10,000.00 pesos every month, and now they don’t because you have run away.

    that is the classical pyramid or ponzi scam, just my two cents.

    Now, as regards net work marketing or multi level marketing, see if the founders/owners/operators of the net have a product that is genuinely useful and better and cheaper.

    Then find out how much you have to part with your money to get to sell that product.

    Find out how much of that product you have to buy before you can get to distribute the product.

    Find our how much you have to still buy every month or every set number of days before you can continue to be part of the net.

    As you exhaust your family members and friends who have bought the product from you, because they wanted to give you a break, and they realize that the product is not as useful or not better or not cheaper than what they can get in any store in the shipping districts of the city, you have to get new customers outside your family circle and friends.

    At this point, every month you still have to buy the compulsory quantity of that product, so you end up with so much inventory of that product, and you still hope that you will find more customers to buy the product so that you will recoup the money you have used up to buy the periodical quantity you are required to buy to belong to the net, that is the time to do some very careful thinking and take a decisive step to stop, or to continue to hope that things will change and you will convince total strangers to buy the product.

    In a net you are also required to recruit new members and to perhaps train them, and also earn from them somehow, sometime, somewhere along the net work, and you might or would succeed recruiting your family members and friends, and they also recruit, and on and on, but at some point you are wondering where it is going to get you, while all the time you are not breaking even.

    That is the danger of network or multi level marketing.

    Now, the founders/owners/operators are the ones making a lot of money from all the recruits starting with yourself.

    Anyway, first find out whether the net has a product that is more useful and cheaper than similar useful products already in the market, and you are not required to already buy a quantity of it to get to be a distributor.

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